ItsMoneyMark Newsletter #10

Greetings – Okay, we jumping straight into it!

Mailpac Group

Mailpac Group Limited ( JSE: MAILPAC ) continue to surge on the JSE hitting J$ 3.75/ share. Clearly analysts, financial advisors and more are pushing buyers into the stock in recent weeks with the expectation of a “bumper” Final Quarter or Christmas Quarter. 

The Covid Resistant Play 

Mailpac is not only “hot” because of this expectation and awaiting the Q4 results but because there are so few Covid resistant public equities available in Jamaica. Mailpac has shown so far in 2020, and in particular in its Q3 results, released November 9, 2020, that it is one of the few. While there are a few “food companies” that have not focused on tourism in the past and therefore didn’t carry this exposure; Mailpac carries a sector showing far superior growth rates than “food”. 

The Top 10 List 

Another major factor is the display of confidence in the Issued Capital of the Company. The traditional main market and for sure, most of the junior market listings have a high net worth individual or a few and/or a few private companies. In the case of Mailpac, as at September 30, 2020 Top 10 public listings, 8 of the 9 slots are held by well known Institutional Players. Again, this not only bodes confidence for analysts in our opinion at many broker-dealers and for avid readers of the quarterlies who follow this stuff and the movements, but demonstrates the “hunger for the stock and by the more liquid players.” 

The only difficult analysis to do currently to see where the growth is really come from as of lately and especially during Covid times, is that the Financials do not break out the courier segment versus the local shopping segment. It would be interesting to see the absolute J$ growth and the growth % in these respective revenue components. 

Regardless, Mailpac Group has set the bar high. 

Super 6 and Mailpac’s Price Action

We launched our “Super 6” on November 13, 2020 or so and we had Mailpac as one of the 6 local equities we were bullish on. Mailpac was around J$ 2.20/ share and you could have gotten volumes seemingly on the Bid. 

Today, as we opened our Letter, Mailpac is at J$ 3.75/ share. 70% move in just over, just over 2 Months. That’s November 12, 2020 to Week of January 18, 2021. 

Mailpac Outlook – The PacMan Effect 

There are so many high P/E in the market that are 19-21x right now, that many analysts have Buys on. 

Let’s assume Mailpac hits J$ 20 cents in EPS for its Year end, although we feel J$ 22 cents in EPS can happen. While not as much upside as a buyer at J$ 2.20 – J$ 2.50/ share, Mailpac could settle off in the short-term at around J$ 4.00 – J$ 4.40/ share and with all these Institutions eating up the shares like “PacMan” and these type of players “don’t sell”, there is a possibility of J$ 5/ share before a pullback. 

Courier Space the new Micro Finance Space?

Each decade in Jamaica spawns typically a sector of “buzz” and not just hype but also the sector that smart money needs to be in. 

In the Early 2000s period, the securities dealer sector was all the rage. High interest rates and the repo market yielded Superb Profits to Shareholders. The 2008 U.S. crisis, IMF to Jamaica, de-risking, among other factors, led to this not being the winner anymore. 

In 2009 and until a few years ago, the Microfinance sector set in. At first, everyone disregarded it as well, and most were late to the Party. Like the securities dealer sector it too provided a good run, with “alpha returns” but probably around 2018/2019 started to trend down and then Covid exacerbated this angle and the result has been, it now seems the heavy train here too is over. Profits have become losses for some, the public ones are struggling, it seems more of the smaller ones are up for sale, and credit losses are growing. The recent announcement of the micro-credit bill, that will further tighten the screws on the sector at a time when it is suffering seems to be a further “hit” that will fasten the downward spiral for the sector. 

So each of the last 2 decades have brought there own “pivots” well before pivot became popular during Covid. 

As Jamaicans make more overseas purchases ( we assume our % is still low to the potential market size that could buy in Jamaica ) and Mailpac public results have shown the “net margins”, similar to Access Financial in 2009/2010 ; it seems, Courier will be the 2020-2025 or further showstopper. 

Some may call it shipping/ logistics but let us simply re-iterate Courier. 

As a wise man once said, “2 companies can have the same resources, the same manpower, and other similar components, but 1 of these companies just chose the right sector for the time” 

Think about investing as well along these lines particularly during Covid. 

Happy investing and Happy markets.

Enjoy the It’s Money Experience. 

Until Next Week!

These opinions and thoughts are solely of ItsMoneyMark and does not constitute investment advice.
Ensure to always speak to a Licensed Financial Advisor.

Thank you for reading!

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